18 Pension fund obligation

The pension plans operated by Repower qualify as defined benefit plans, with the main plan established in Switzerland. Employees in Switzerland are members of the legally independent pension fund PKE Vorsorgestiftung Energie. This is a pension fund within the meaning of the Federal Law on Occupational Pensions for Old Age, Survivors and Disability (BVG). The law governs the benefits employees are entitled to as well as the organisation and financing of pension funds. The fund is designed to provide occupational pensions for employees of the affiliated companies and their family members and survivors that cover the economic consequences of old age, disability and death. PKE Vorsorgestiftung is a defined contribution plan in Switzerland in accordance with the BVG. Under the defined contribution plan, the benefits paid out in the case of an insured event are based on the insured's contributions plus interest.

An equal number of employer and employee representatives make up the fund's Board of Trustees. The Board of Trustees defines the fund's objectives and principles and regulates and monitors the investment process (investment strategy, investment policy and investment guidelines). In the management of the fund's assets, the financial interests of the insureds are given top priority. Assets must be managed in accordance with the respective investment regulations so as to guarantee the timely payment of benefits and compliance with the risk limits laid down in the investment policy.

In the event of any necessary restructuring measures, the companies determine the interest rate and shortfall contributions to be paid together with their insureds. The contribution of the companies must be at least as high as the sum of the contributions of the insureds. This means that Repower may have a legal or constructive obligation to pay additional benefits. For this reason, a defined contribution plan also constitutes a defined benefit plan under IFRS.

The probability and scope of any restructuring measures as a result of a plan shortfall can be reduced in the defined contribution plan (in accordance with BVG) by lowering the interest rate applied to the capital accrued by beneficiaries.

The defined contribution plan operated by PKE Vorsorgestiftung Energie will pay out pensions in two parts: 90 per cent of the pension will be guaranteed as a basic pension and 10 per cent as a variable pension, depending on PKE's coverage ratio. If the coverage ratio is below 90 per cent, only the basic pension will be paid out. If the coverage ratio is higher than 120 per cent, the target pension will be increased by a maximum of 10 per cent. The variable component will be redefined each year and be valid for an entire year. This rule makes it possible for future retirees to also contribute to eliminating a potential coverage shortfall. They can, however, also participate in a positive development.

PKE Vorsorgestiftung Energie was converted from a joint foundation into a collective foundation with effect 1 January 2015. Rather than a single binding coverage ratio, there will now be a separate coverage ratio for each affiliated company.

In the 2013 financial year Repower had decided that on 1 April 2014 it would leave the PKE Pensionskasse Energie defined benefit plan that had existed in the past and switch to the PKE Vorsorgestiftung Energie defined contribution plan. Changes in the plan under this new arrangement resulted in past service costs (losses due to plan changes) in the amount of TCHF 2,478.

The following table provides an overview of the balances recognised in relation to the pension plans in the consolidated financial statements:

The present value of the defined benefit obligation of the Swiss pension plans is broken down as follows into the individual groups of pension beneficiaries:

All pension commitments are vested. The weighted average term of the defined benefit pension obligation under the defined contribution plan totalled 16.6 years (previous year: 16.5 years) at 31 December 2015.

The investment strategy is based on the results of an asset and liability analysis. The following table provides a breakdown of the plan assets and strategy of the investment portfolio:

Fluctuations in pension provisions with separate reconciliation statements for the plan assets and the present value of the defined benefit obligation are shown in the table below:

The key actuarial assumptions are as follows:

The average retirement age is 63.

An increase or decline in the key actuarial parameters would affect the present value of the defined benefit obligation at 31 December 2015 as follows:

Employer contributions of TCHF 4,048 (previous year: TCHF 3,939) are expected for the 2016 financial year.